Creating A "Regenerative Economy" To Transform Global Finance Into A Force For Good

Science tells us we are in ecological overshoot. We are using Earth’s resources faster than they can be regenerated. So, too, are we in economic and financial overshoot, propelled by a financial system that demands growth with no concern for the environment and little regard for human well-being. Common sense tells us that an economy that is growing by using up its material resources at an exponential rate is fundamentally misaligned with the finite boundaries of Earth’s ecosphere. Unless we shift to a new economic model, the result will be a series of mutually reinforcing crises—economic, social, and ecological—a catastrophe on a scale without historical precedent.

Our modern global economy, recent crises notwithstanding, has delivered remarkable historical achievements, and prosperity (for many) unmatched in human history. Now, however, it must evolve to address the grotesquely inequitable distribution of wealth, intractable poverty in much of the world, and chronic failure to deliver living-wage jobs, all while respecting ecological boundaries. The World Bank, the International Monetary Fund, the Organization for Economic Co-operation and Development and the International Energy Agency all agree that meeting these challenges demands not merely problem solving as we’ve done in the past, but systemic change to address root causes.

The speculative excess and ethical shortcomings of contemporary Wall Street are now legend. But what ails Wall Street goes much deeper.

This has profound implications, not only for how we live our lives, but also for our dysfunctional financial system, itself the ultimate but least understood root cause of our current and unfolding crises.

The speculative excess and ethical shortcomings of contemporary Wall Street are now legend. But what ails Wall Street goes much deeper. Climate change,ecosystem collapse,soil degradation and biodiversity loss, driven by the fundamental unsustainability of short-term, finance-driven business as usual will continue to deliver shocks to the global economy. Such industries of the old economy as fossil fuels, toxic manufacturing, industrial agriculture, and others that have historically received subsidies and are driving the collapse of natural systems must be replaced by investments into a real economy that regenerates human and natural capital.

This transition will be costly. Take, for example, "the carbon bubble"—the fossil assets that would need to be left in the ground if the world successfully implements climate protection. Estimates run as high as a $20 trillion loss of asset value. In contrast, the direct sub-prime mortgage write-off only amounted to $2.7 trillion. Already, two investment analysis firms have found that fossil free portfolios are outperforming investments that contain fossil polluters. A 2013 survey found that more than half of fund managers surveyed had sold or avoided making investments because of concerns over climate change.

Smart companies are achieving quantum leaps in resource efficiency, beginning with energy productivity that moves us back toward balance, buys time, and saves money. "The 3% Solution," reveals that US businesses cutting carbon emissions by three percent annually would save up to $190 billion in 2020 alone, or $780 billion over 10 years, and put the US corporate sector on track for a 25 percent carbon reduction against 1990 levels.

The next step is to shift investment into the clean infrastructure needed for the future. Jigar Shah, founder of Sun Edison, is inviting entrepreneurs to create the equivalent of 100,000 companies to sell $100 million worth of climate change solutions by 2020, creating a $10 trillion economy and mitigating the climate crisis at a profit. The International Energy Agency says that we’ll already have more than $4 trillion invested into climate change solutions by 2020. Let’s finish the job, create jobs (typically 10 times more jobs per unit of investment than the old economy) and unleash real prosperity.

We need to transform finance and shift the flow of investment capital to perpetuate a Regenerative Economy that serves humanity.

Ultimately, we need to transform finance and shift the flow of investment capital to perpetuate a Regenerative Economy that serves humanity and is a steward of Earth’s ecosystems.

Natural systems, from living beings to whole ecosystems, are sustainable because they are regenerative. The transition to a Regenerative Economy is about seeing the world in a different way—a shift to an ecological world view in which nature is the model. The regenerative process that defines thriving, living systems must define the economic system itself.

Right Relationship: It holds the continuation of life sacred and recognizes that the economy is embedded in human culture and the ecosphere.

Entrepreneurialism: A Regenerative Economy draws on the innate ability of human beings to innovate and "create anew" across all sectors of society.

Wealth Viewed Holistically: True wealth is defined in terms of the well-being of the "whole," achieved through the enhancement and harmonization of the multiple forms of capital—social, ecological, manufactured, and financial.

Shared Prosperity: Wealth is equitably (although not necessarily equally) distributed in the context of an expanded view of true wealth.

Real Economy Circularity: Ultimately solar powered, the economy strives continually to minimize energy, material, and resource throughput radically at all phases of the production cycle. Products are remanufactured, recycled and composted, with natural outputs safely composted to the biological world, while minerals and human made substances return to the industrial cycle.

Resiliency: The whole system develops the long run ability to adapt and learn from shocks; adaptability to change is valued over current brittle concentrations of power and hyper-efficiency.

Honors Place: A Regenerative Economy operates to nurture healthy, stable communities and bioregions, both real and virtual, in a connected mosaic of place-centered economies.

Early green shoots of Regenerative Capitalism are already manifesting in a multitude of scalable projects and enterprises on the ground. These include agriculture that replenishes soil fertility, the sharing economy, collaborative and cooperative ownership structures, economic democracy, investments in renewable energy and resilient communities and much more.

Alternatives are emerging, as documented in Capital Institute’s "Field Guide to Investing in a Regenerative Economy" and elsewhere. They're appearing at conferences on sustainable banking, social finance, impact investing and B Corps, local living economies, crowd-funding, and cooperatives, and initiatives such as B Team and Breakthrough Capitalism. The task now before countries, cities, corporations and communities is to turn Regenerative Capitalism into large global enterprises and suffuse its principles into the large state actors that collectively drive the global economic system.

Real investment is the bridge to the economic system of the future. The transition will depend upon a fundamental transformation in where and how these large economic actors invest. We must both reimagine society’s public interest in what does and does not get financed, and repurpose our financial institutions to be in service of the interdependent human well-being and ecosystem integrity.

This transition will not be quick or easy. It may even seem like an unrealizable utopian dream. But as the challenges facing us begin to cascade, what now seems impossible will become the inevitable.

John Fullerton is President of the Capital Institute, and a former managing director at JPMorgan. Hunter Lovins is President of Natural Capitalism Solutions and a professor of sustainable business. Both are members of the Steering Committee of the Alliance for Sustainability And Prosperity, and advise Richard Branson’s B-Team. Continued

October 29, 2013 | 8:49 AM

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Real investment is the bridge to the economic system of the future. The transition will depend upon a fundamental transformation in where and how these large economic actors invest. We must both reimagine society’s public interest in what does and does not get financed, and repurpose our financial institutions to be in service of the interdependent human well-being and ecosystem integrity. - Business leaders would benefit from studying great writers. - */S.Y\ Looking for answers with new Mindset after Transformation